What is Anti-Money Laundering? 

 

Table of Contents 

- What is Anti-Money Laundering? 

- Anti-Money Laundering Understanding (AML)

- Anti-Money Laundering History

- What does AML in cryptography mean?

- What Are Some Methods of Money Laundering?

- Final Thoughts 

 

Cryptocurrencies and fiat money are both impacted by anti-money laundering and illegal conduct. Anti-money laundering (AML) is a law or regulation that prohibits the exchange of cryptocurrencies for the purpose of money laundering. The introduction of AML legislation was a reaction to the expansion of the financial sector, the abolition of international capital controls, and the ease with which intricate webs of financial transactions could be carried out.

 

According to a high-level United Nations body, money laundering will account for $1.6 trillion in yearly flows in 2020 or 2.7% of the world's GDP.

 

Anti-Money Laundering Understanding (AML)

The 1970 Bank Secrecy Act mandated that banks report cash deposits of more than $10,000, but AML regulations in the US have since grown to include a complex regulatory framework requiring financial institutions to perform due diligence on their clients and look for and report suspicious transactions. Similar measures have been adopted by the European Union and other governments.

 

Anti-Money Laundering History

While there have long been efforts to regulate illicit riches, the term "money laundering" is only a few decades old and has only recently become widely used. The 1970 Bank Secrecy Act, which was passed in part to combat organized crime, was the first significant piece of American AML legislation. The legislation required banks to identify the individuals performing transactions and to keep records of transactions, in addition to forcing banks to report cash deposits of more than $10,000. In 1974, the same year that the term "money laundering" became widely used in the wake of the Watergate crisis, the U.S. Supreme Court upheld the validity of the Bank Secrecy Act.

 

Further law was passed in the 1980s as drug trafficking activities escalated, in the 1990s as financial monitoring was expanded, and in the 2000s as funding for terrorist organizations was cut off.

 

When the Financial Action Task Force was established in 1989 by a number of nations and international organizations, anti-money laundering gained more worldwide attention (FATF). Its goal is to create and encourage the adoption of global standards to stop money laundering. Following the 9/11 terrorist attacks, FATF expanded its scope to include preventing the financing of terrorism in October 2001.

 

The International Monetary Fund is a crucial organization in the fight against money laundering (IMF). Similar to the FATF, the IMF has pressured its member nations to adhere to global norms in order to stop the financing of terrorism. The 1998 Vienna Convention on Drug Trafficking, the 2001 Palermo Convention against International Organized Crime, and the 2005 Merida Convention against Corruption all have AML rules.

 

What does AML in cryptography mean?

Implied laws and regulations created by the regulatory organizations stop money launderers from changing cryptocurrencies into cash in an illegal manner.

 

A case study of money laundering:

What if a man is a drug dealer and makes millions of dollars in cash from his illicit business? How can he prove this wealth to the authorities?

 

The drug dealer purchases bitcoin in an environment where he is not required to provide any bank information or complete any type of KYC. This enables the drug dealer to invest in bitcoin with black money, which is one of the reasons bitcoin is more frequently used by criminals for money laundering.

 

2002 Act to Combat Money Laundering

The goal of this law is to stop money laundering. Their primary goal is to prevent money laundering and confiscate the user accounts of those who engage in illegal activity in order to transform their black money into white money.

 

The Financial Action Task Force (FATF) is an organization that creates anti-money laundering regulations to make the cryptocurrency sector a safe place. They also keep an eye on the need for investments to be made in cryptocurrencies from legitimate sources.

 

What Are Some Methods of Money Laundering?

Money launderers frequently use cash-generating enterprises owned by associates to transfer illicit funds, or they may inflate invoices in transactions involving shell companies.

 

Money transfers used in layering transactions are intended to hide the source of illegal payments. Structuring, also known as smurfing, is the act of dividing a sizable transfer into smaller ones in order to avoid reporting requirements and AML scrutiny.

 

Is It Possible To Stop Money Laundering?

AML enforcement can at best try to control money laundering rather than eradicate it completely given that projected annual flows are close to 3% of the world's economic output. Despite the fact that AML regulations undoubtedly make their lives more difficult, money launderers never seem to run out of resources or collaborators.

 

What Sets AML, CDD, and KYC Apart from One Another?

Customer due diligence (CDD) refers to the examination financial institutions (and others) are expected to conduct to prevent, identify, and report infractions. Anti-money laundering (AML) is the general term for the laws, rules, and processes aimed at discouraging money laundering. KYC regulations require customer due diligence when screening and verifying potential customers.

 

Final Thoughts 

We hope that this blog post will be beneficial for you. We will continue to create useful works in order to get inspired by everyone. We are sure that we will achieve splendid things altogether. Keep on following Finage for the best and more.

You can get your Real-Time and Historical Cryptocurrency Data with Finage free Crypto Data API key.

Build with us today!

Start Free Trial